19th September 2019
- US Federal Reserve cuts benchmark interest rate for the second time this year
- The committee lowered the policy interest rate by 25 basis points to a target range of 1.75pc to 2pc
- Three out of 10 officials vote against rate cut decision
- Trump says US will ‘substantially increase’ sanctions on Iran after Saudi oil attack
- In UK, inflation cools while house prices shrink across four regions including London
London’s benchmark FTSE 100 closed 0.09pc lower at 7,314.05 while the more domestically-focused FTSE 250 closed 0.07pc higher at 20,054.43. Frankfurt and Paris stocks closed marginally higher. Oil prices have continued to tumble today after last weekend’s attacks on oil facilities in Saudi Arabia. Oil spiked on Monday in reaction to the news but tumbled yesterday.
Fed Cuts Again
Federal Reserve policy makers lowered their main interest rate for a second time this year and Chairman Jerome Powell said that “moderate” policy moves should be sufficient to sustain the U.S. expansion. He left the door open to “a more extensive sequences of cuts” if needed, but stressed this was not what officials expect. “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks,” Powell told reporters Wednesday after the Fed cut its benchmark rate by a quarter percentage point to a range of 1.75% to 2%. “Weakness in global growth and trade policy have weighed on the economy.” President Donald Trump took to Twitter within minutes of the FOMC’s announcement to say policy makers had failed again by not cutting more and had “No ‘guts,’ no sense, no vision!”
Market Open
Asian equity futures are higher and U.S. stocks erased losses after the Federal Reserve policy makers cast doubt on the need for further easing. The dollar rallied and Treasuries pared gains. While a rate cut was widely expected, investors were more focused on the outlook for further cuts this year. The S&P 500 Index wiped out a drop that at one point reached the biggest in four weeks, as financial companies that benefit from higher rates rallied. Oil ticked lower after tumbling Tuesday and gold retreated. The focus in Asia will shift to the Bank of Japan Thursday. Though most expect rates and asset purchases to remain unchanged, investors will be on high alert after Governor Haruhiko Kuroda said the central bank was “more positive” about adding stimulus.
FTSE 100 Trading Signals, Forecast and Prediction
There have been a few tests of the 7290 level now and that is the current line in the sand, however we have the 25ema on the daily at 7280 and the fib at 7274 for the moment so we may well see a false break of 7290, suck in the bears and then climb back to trigger some stops. The markets have held up pretty well since the Fed last night, and the FTSE has been hovering around the 7300 area overnight. The Fear/Greed indicator is still on 66/100 though (still set at Greed) so I am still thinking that we will see a pull back soon (thinking 2962 on S&P now) before another leg higher.
For today, we have the daily pivot as initial resistance at the 7320 level, and we have dropped back below the 200ema on the 30min chart which is at this level too – so now likely to act as resistance. If the bulls were to break above the 7320 level then I am expecting us to climb towards the 7370 area, and we still have the 7398 daily resistance above that.
If the bears were to break below the 7270 level now then a drop down to the daily support at 7240 looks highly likely, as we have the bottom of the 10 day Raff channel here and also S3 for today at 7237 – so a long here may well be worth a go if we get that low.
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